Thursday, August 4, 2016

The Sole Developer Clause in PAMA: How Bad Is It?

One of the most complex and interesting documents in the history of CMS laboratory policy is the final rulemaking to implement Section 2016 of PAMA (Clinical Lab Fee Schedule Policy Reform).

Most readers have heard of PAMA and several excellent ten page summaries are available (see a listing of some links, here).

One of the quirkiest parts of the is the CMS intepretation that the test must be developed and furnished by one laboratory. (CMS does allow the "laboratory" so defined to have more than one CLIA lab.)

CMS explained on page 41,060 sole developer is treated strictly and if the development is 20% at an academic center and 80% at an independent laboratory, then neither one can claim to be the sole developer, and, lacking a sole developer, the test cannot be an ADLT. More detail after the break. And I've quoted CMS below, so you can have a crack at parsing its language for yourself.

[T]he statute seeks to establish special payment status for tests that are unique and are provided only by the laboratory that developed the test, or a subsequent owner of thatlaboratory. In other words, we view the statute as intending to award special payment status to the one laboratory that is expending the resources for all aspects of the test—developing it,marketing it to the public, performing it, and selling it...An academic institution
that creates a test but does not fully develop it for use by the public would
not be considered the original developing laboratory if it is not a laboratory
under § 413.2, and if it does not design, sell, offer, and furnish the test, it
would not meet the requirements of a single laboratory in the definition of
ADLT.

The commenter describes
a situation wherein an academic institution licenses the intellectual property
to another entity that “further develops” [marks added] the test for commercialization. We believe
that by ‘‘discovering’’ the test, the academic institution partially
develops the test. For instance, a laboratory that purchases the
intellectual property of the test may rely on the academic institution to
develop a method the test utilizes or a particular reagent the academic institution
has patented. In such situations, the laboratory that purchased the
intellectual property would not be expending its own resources on all
aspects of the development of the test and therefore, could not be
considered an original developing laboratory of the test. It also could not be
a successor owner if the academic institution is not the original developing
laboratory or a single laboratory. As such, the test would not qualify for
ADLT status. [Federal Register, June
23, 2016, 81 FR 41060].[1]

Note that this seems to be over-arching language that applies to both the classical track ADLT (MAAA tests) and the FDA track ADLT tests (such as Foundation Medicine's test will be after it gets FDA approval as a sole source test.) Since the language shown above has not yet been tested in a series of actual cases, it's uncertain if CMS will strictly interpret the possibility that a sliver of the test was "not invented here."

For example - and I'm not saying I take this seriously - if an FDA approved sole source genetic test is based on publicly available genomic clinical variant tables, could that be fine with the FDA but could CMS ask whether the lab company had "solely developed" the test entirely with its own resources? Don't labs doing cancer MAAAs almost always rely on, buy, or license biobank samples? There must be some line between these activities, and the idea that anyone else has "partially developed" the test in any way, including using intellectual property (a clinical database?) rather than "expending its own resources." For its policy to make common sense, we'll have to count on CMS staff applying common sense.

(Click to enlarge table).

____
Another tricky clause is that the ADLT must be "that the test must provide new clinical diagnostic
information that cannot be obtained from any other existing test on the market or combination of tests....our view that ADLTs that meet the criterion are innovative tests that are new and different from any prior test already on the market and provide the individual patient with valuable genetic
information to predict the trajectory of the patient’s disease process or response to treatment of the patient’s disease that could not be gained from another test or tests on the market..(p. 41057)." So, for example, do the Genomic Health and Myriad prostate gene panel tests provide "new clinical information" relative to PSA, and also "new clinical information" relative to each other? Just how CMS will define "information that cannot be obtained from any other existing test" remains to be seen as well. What if sole source tests are approved as LDTs by FDA under the same 510(k)? And so on. Unlike the Intellectual Property clause discussed above, which applies to both MAAA and FDA track ADLTs, the "uniqueness" seems to apply only to MAAA ADLTs, since Congress itself allows "cleared tests" or 510(k) tests to be ADLTs and by definition they are "substantially equivalent" to something else.

About the Author

Bruce Quinn MD PhD is an expert on health reform, innovation, and Medicare policy. He helps both large and small companies understand and overcome hurdles to commercialization, as well as craft business strategies for a changing environment. CONTACT Dr. Quinn through www.brucequinn.com. BACKGROUND: Dr. Quinn has worked in academic medicine, Accenture business strategies, and for the Medicare program. EDUCATION: Stanford MD/PhD, MIT Postdoc, Kellogg MBA.